Letter From Scott Turow: Grim News

by | Mar 11, 2012 | Justice Department, Monopoly, Scott Turow | 1 comment

There
is a lot of discussion about the Justice Department filing and antitrust
lawsuit against the five major book publishers and Apple. After reading this
open letter from Scott Turow, President of the Author’s Guild, and the comments
it generated I knew I had to share it with you. I’ve included his message in
its entirety. Here is the
link to his original post
where you can read the comments,
http://tinyurl.com/759tfls
We can clearly see Scott’s position and those
of the commenters. How do you feel about the subject?

Dear Member,

Yesterday’s reports that the Justice Department may be near filing an antitrust
lawsuit against five large trade book publishers and Apple is grim news for
everyone who cherishes a rich literary culture.

The Justice Department has been investigating whether those publishers colluded
in adopting a new model, pioneered by Apple for its sale of iTunes and apps,
for selling e-books. Under that model, Apple simply acts as the publisher’s
sales agent, with no authority to discount prices.

We have no way of knowing whether publishers colluded in adopting the agency
model for e-book pricing. We do know that collusion wasn’t necessary: given the
chance, any rational publisher would have leapt at Apple’s offer and clung to
it like a life raft. Amazon was using e-book discounting to destroy
bookselling, making it uneconomic for physical bookstores to keep their doors
open.

Just before Amazon introduced the Kindle, it convinced major publishers to
break old practices and release books in digital form at the same time they
released them as hardcovers. Then Amazon dropped its bombshell: as it announced
the launch of the Kindle, publishers learned that Amazon would be selling
countless frontlist e-books at a loss. This was a game-changer, and not in a
good way. Amazon’s predatory pricing would shield it from e-book competitors
that lacked Amazon’s deep pockets.

Critically, it also undermined the hardcover market that brick-and-mortar
stores depend on. It was as if Netflix announced that it would stream new movies
the same weekend they opened in theaters. Publishers, though reportedly
furious, largely acquiesced. Amazon, after all, already controlled some 75% of
the online physical book market.

Amazon quickly captured the e-book market as well, bringing customers into its
proprietary device-and-format walled garden (Sony, the prior e-book device
leader, uses the open ePub format). Two years after it introduced the Kindle,
Amazon continued to take losses on a deep list of e-book titles, undercutting
hardcover sales of the most popular frontlist titles at its brick and mortar
competitors. Those losses paid huge dividends. By the end of 2009, Amazon held
an estimated 90% of the rapidly growing e-book market. Traditional bookstores
were shutting down or scaling back. Borders was on its knees. Barnes &
Noble had gamely just begun selling its Nook, but it lacked the capital to
absorb e-book losses for long.

Enter Steve Jobs. Two years ago January, one month after B&N shipped its
first Nook, Jobs introduced Apple’s iPad, with its proven iTunes-and-apps
agency model for digital content. Five of the largest publishers jumped on with
Apple’s model, even though it meant those publishers would make less money on
every e-book they sold.

Publishers had no real choice (except the largest, Random House, which could
bide its time – it took the leap with the launch of the iPad 2): it was seize
the agency model or watch Amazon’s discounting destroy their physical
distribution chain. Bookstores were well along the path to becoming as rare as
record stores. That’s why we publicly backed Macmillan when Amazon tried to use
its online print book dominance to enforce its preferred e-book sales terms,
even though Apple’s agency model also meant lower royalties for authors.

Our concern about bookstores isn’t rooted in sentiment: bookstores are critical
to modern bookselling. Marketing studies consistently show that readers are far
more adventurous in their choice of books when in a bookstore than when
shopping online. In bookstores, readers are open to trying new genres and new
authors: it’s by far the best way for new works to be discovered. Publishing
shouldn’t have to choose between bricks and clicks. A robust book marketplace
demands both bookstore showrooms to properly display new titles and online
distribution for the convenience of customers. Apple thrives on this very
model: a strong retail presence to display its high-touch products coupled with
vigorous online distribution. While bookstores close, Apple has been busy
openingmore than 300 stores.

For those of us who have been fortunate enough to become familiar to large
numbers of readers, the disappearance of bookstores is deeply troubling, but it
will have little effect on our sales or incomes. Like rock bands from the
pre-Napster era, established authors can still draw a crowd, if not to a
stadium, at least to a virtual shopping cart. For new authors, however, a
difficult profession is poised to become much more difficult. The high
royalties of direct publishing, for most, are more than offset by drastically
smaller markets. And publishers won’t risk capital where there’s no reasonable
prospect for reward. They will necessarily focus their capital on what works in
an online environment: familiar works by familiar authors.

Two years after the agency model came to bookselling, Amazon is losing its
chokehold on the e-book market: its share has fallen from about 90% to roughly
60%. Customers are benefiting from the surprisingly innovative e-readers Barnes
& Noble’s investments have delivered, including a tablet device that beat
Amazon to the market by fully twelve months. Brick-and-mortar bookstores are
starting to compete through their partnership with Google, so loyal customers
can buy e-books from them at the same price as they would from Amazon.
Direct-selling authors have also benefited, as Amazon more than doubled its
royalty rates in the face of competition.

Let’s hope the reports are wrong, or that the Justice Department reconsiders.
The irony bites hard: our government may be on the verge of killing real
competition in order to save the appearance of competition.

This would be tragic for all of us who value books, and the culture they
support.

Sincerely,

Scott Turow
President

The Authors Guild |
31 E 32nd St | Fl 7 | New York, NY 10016 | United States

1 Comment

  1. And so the debate continues — Turow puts forth an impassioned and logical argument. Let's hope someone is listening.

    Reply

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